World Oil Demand - October 2015

Source: OPEC_RP151006 10/13/2015, Location: Europe

World oil demand growth for 2015 was adjusted higher by 40 tb/d as a result of
better-than-expected performance from OECD Americas, Europe, Other Asia and
China in 3Q15. As a result, 2015 world oil demand growth currently stands at
1.50 mb/d, with total global consumption of 92.86 mb/d.

For 2016, world oil demand growth was adjusted lower by 40 tb/d, mainly to
reflect a high baseline effect in OECD Americas. World oil demand growth is now
anticipated to be 1.25 mb/d, with total global consumption at around 94.11 mb/d.

OECD Americas
The latest US monthly data for July shows a solid increase in oil demand by around
0.7 mb/d or around 4% y-o-y, higher than the observed average trend in growth since
the beginning of 2015. Total product demand stood at 20.40 mb/d. Gasoline
requirements accounted for the largest share of oil demand and grew strongly by
almost 0.2 mb/d, an increase of around 2% y-o-y, with the support of a lower fuel oil
price environment. Distillate demand stayed flat during July y-o-y, while jet fuel
requirements registered solid growth, backed by increased travel during the traditional
holiday season. Some increases were seen in residual fuel oil, mainly as a result of the
previous year’s lower baseline. Based on data available for three quarters of 2015 –
monthly data until July and preliminary weekly data for August and September – US oil
demand seems to have grown by around 0.4 mb/d, with gasoline requirements being
the product category most on the rise and distillates on the decline, compared with the
same period the previous year. Moreover, some declines were registered in residual
fuel oil demand.

For the remainder of 2015 and 2016, US oil demand is expected to be strongly
determined by gasoline usage in the road transportation sector and fuel price levels.
Higher-than-expected gasoline consumption, especially in 2H15, has set a high
baseline for 2016 consumption. As a result, some downward revisions were made to
2016 oil demand estimates. The overall risk for US oil demand remained balanced from
the previous month – upside risks originate in the pace of projected growth of the
economy and oil usage in the road transportation sector, while fuel substitution and
vehicle efficiencies dominate downside risks.

Expanding Mexican manufacturing activity in August 2015, in combination with low fuel
prices, have led to increases in oil demand with residual fuel oil and gasoline
accounting for the bulk of these decreases. The risks for Mexican oil demand in 2015
and 2016 are skewed slightly to the upside, but depend on the overall economic
development.

In Canada, oil demand in July decreased y-o-y. Gains in jet fuel have been more than
offset by sharp declines in requirements for all other main product categories.
Canadian oil demand for 2015 and 2016 is projected to remain roughly at 2014 levels,
marking only marginal increases, with risks equally distributed between the upside and
the downside, depending on developments in the economy.

In 2015, OECD Americas’ oil demand is expected to grow by 0.36 mb/d compared
with a year earlier. For 2016, the region’s oil demand is projected to increase by
0.29 mb/d compared with 2015.

OECD Europe
European oil demand remained strong for another month, with increases of around
0.3 mb/d in August y-o-y; the majority of countries in the region saw positive demand
growth. Data for the first eight months of 2015 showed increasing European Big 4 oil
demand by approximately 0.11 mb/d, equating to 1.7% y-o-y, taking total demand to
6.70 mb/d, with diesel, jet fuel, LPG and residual fuel oil seeing positive growth and
gasoline remaining flat compared with the same period one year ago. Gains in
transportation fuels are in line with the positive momentum in auto sales, which showed
solid increases of around 11% during August y-o-y and large expansions into all major
auto markets.

General expectations for the region’s oil demand during 2015 continued to improve
over the previous month’s projections but continue to be subject to risks from high
taxation polices for oil use and fuel substitution. The main factors that could push oil
demand up are expected economic growth, a low historical baseline and the low fuel
price environment, the latter despite existing high taxation.

For 2016, expansion in OECD Europe’s major economies in view of the low oil price
environment is the major assumption. From a product point of view, transportation
fuels, particularly diesel and gasoline, are projected to lead oil consumption. On the
other hand, some uncertainties linked to the economic development as well as fuel
substitution and efficiencies in the road transportation sector remain negative
contributors to oil demand in the region next year.

OECD Europe’s oil demand is projected to grow by 0.17 mb/d in 2015, while in 2016
oil demand will marginally decline, by comparison.

OECD Asia Pacific
Preliminary data implies that Japanese oil demand rose by 0.12 mb/d, which equates
to a hike of around 4% y-o-y in August; the first month to see a rise since 1Q14 and
following a sharp decline in July. Total product consumption stood at 3.53 mb/d in
August.

The picture was promising in all product categories, with the only exception being
residual fuel oil. Naphtha and LPG requirements for the petrochemical industry, as well
as jet fuel, constituted the largest share of increases. Growth in gasoline and diesel
requirements in the road transportation sector also continued, while the picture remained negative regarding volumes required for direct burning of fuel oil. Direct
burning of crude oil, however, showed increases y-o-y, despite the re-opening of the
first nuclear plant in the country, as exceptionally warm weather in some areas
increased cooling needs. The restart of an additional reactor at Sendai is expected to
take place by the end of 2015, pending successful completion of further inspections.

The outlook for 2015 and 2016 Japanese oil demand remained unchanged from the
previous month’s forecasts, with risks continuing to be skewed toward the downside,
mainly as a result of a weakening economic forecast. Moreover, projections for 2016
assume a strong likelihood that a number of nuclear plants will rejoin operation.

In South Korea, available data for July indicates a slight increase of 20 tb/d or around
1% compared with the same month a year earlier. Total product consumption stood at
2.34 mb/d in July. All main product categories were on the rise compared with July
2014, with the exception of residual fuel oil, particularly LPG, gasoline, diesel and
naphtha requirements. The outlook for South Korean oil consumption during 2015 and
2016 remains unchanged and positive compared with the previous month’s projections.

OECD Asia Pacific’s oil consumption is projected to fall by 0.11 mb/d in 2015 and
continue to drop in 2016, to a larger extent, by 0.14 mb/d y-o-y.

Other Asia
Indian oil demand has been demonstrating robust growth y-o-y and this continued to
be the case through August. Demand for petroleum products rose strongly, increasing
by around 0.24 tb/d or 7% y-o-y, taking total demand to 3.62 mb/d.

There has been excellent growth in all products y-o-y with the exception of fuel oil. LPG
demand was higher by 41 tb/d or around 8% y-o-y, driven by cylinder subsidies,
logistical ease in some bottlenecks and a switch from other products to LPG.

Gasoline demand reached 0.5 mb/d in spite of slower passenger vehicle sales growth
than in previous months – it increased by 6% in August from double-digit figures seen
earlier in the year. This upward trend encouraged the Indian Oil Corporation Ltd (IOC)
and the Hindustan Petroleum Corporation Limited (HPCL) to actively continue
importing gasoline. Indeed, imports have been substantially higher in 2015, averaging
around 30 tb/d for the January–July period, and expectations are high that this trend
will continue for the remainder of the year. Another supporting factor for gasoline
consumption was lower retail gasoline prices, which were reduced further in September
– the fourth time since May. They dropped to $0.92/litre in August from $1.20/litre for
the same month one year earlier and from $1.05/litre in July as reported by the IOC.

Diesel demand also increased in August, rising by 79 tb/d or around 6% y-o-y. Less
rain than anticipated led to an increase in diesel consumption in the agricultural sector,
in addition to the late arrival of seasonal monsoon rains in August of the previous year,
which led to reduced diesel demand and a lower base of comparison. Support also
stemmed from the industrial sector, as the manufacturing PMI stood at 52.6 points in
August, increasing for the third consecutive month. Fuel oil demand weakened by
around 10 tb/d or minus 4% y-o-y, largely as a result of natural gas substitution in the
power and fertilizer sectors.

Going forward, expectations for Indian oil demand in 2016 are firm at this stage, with
also a slight appreciation in the overall economy expected to positively affect oil
demand data.

The latest July data for Indonesia shows a rise of around 30 tb/d or 2% y-o-y, with
growing requirements for industrial and transportation fuels (gasoline, diesel and jet).
Developments in manufacturing data supported industrial fuel requirements.

In Thailand, oil demand rose in July, showing an increase of around 35 tb/d, which
equates to around 4% y-o-y, mainly driven by transportation fuels. The key issues for
the Other Asia region include budget deficits and the effects of subsidy removal on oil
products.

For 2016, oil demand projections for Other Asia remain as stated the previous month,
with major assumptions hinting at improved economic activity over the current year,
while the effect of subsidy reduction is assumed to be less than it has been in past
years. In terms of products, the middle of the barrel is anticipated to lead growth,
followed by transportation fuels.

Other Asia’s oil demand is anticipated to grow by 0.30 mb/d y-o-y in 2015 and by
0.29 mb/d in 2016.

Latin America
August oil demand data for Brazil was once again disappointing compared with the
same month of the previous year. Oil demand growth shrank by 0.10 mb/d or around
4% y-o-y, taking year-to-date oil demand growth levels into negative territory. Total oil
demand stood at 2.44 mb/d in August. Fuel oil and most transportation fuels – with the
exception of ethanol – were the main drivers behind the decline. Gasoline declined by
85 tb/d, which equates to more than 11%, marking the seventh decrease in 2015.
Moreover, passenger vehicle sales showed slower economic momentum in the
country, with August sales data reflecting lower growth by more than 20% y-o-y.

On the other hand, ethanol consumption rose significantly, increasing by more than
0.10 mb/d or more than 48% y-o-y, as drivers in Brazil preferred to switch from gasoline
to more competitively priced ethanol. Ethanol demand growth was exceptional in 2015,
on a y-o-y basis.

Diesel demand eased compared with the same month one year ago, declining by
around 68 tb/d or more than 6% y-o-y, primarily because manufacturing and industrial
activities are slowing in tandem with sluggish overall economic conditions. Jet/kerosene
fuel demonstrated a slight decline of around 3 tb/d or 3% y-o-y. Fuel oil demand
experienced the largest losses, dipping by around 44 tb/d, which equals a decrease of
36% y-o-y as the result of a high baseline, along with easing industrial production and
power generation demand. The risks for 2015 oil demand in the region are currently
skewed to the downside, with anticipation of a declining economy in Brazil, while
expectations for 2016 oil demand growth remain at the same levels anticipated one
month earlier.

In Argentina, oil demand continued to grow amid some economic recovery. All
transportation fuels (gasoline, jet/kerosene and diesel oil) rose, by 6%, 3% and 6%,
respectively.

The latest Ecuadorian data for August reflected lower oil requirements compared with
the same month one year ago by around 24 tb/d or 9%; gasoline and fuel oil
requirements declined, while LPG was the only product that saw positive growth.

Projections for 2016 oil demand growth in Latin America are in line with the previous
month’s expectations, reflecting slightly better expectations for economic development
compared with 2015, and providing some support for oil demand projections going
forward. Brazil is assumed to be the main contributor to growth, with transportation
fuels leading.

Latin American oil demand is expected to grow in 2015 by 0.10 mb/d and increase to
reach 0.13 mb/d in 2016.

Middle East
August oil demand in Saudi Arabia increased by 0.1 mb/d or around 5% y-o-y, to
reach 2.86 mb/d. All products experienced growth with the exception of diesel oil, for
which demand shrank by around 7% y-o-y. Jet/kerosene, fuel oil, LPG and direct crude
for burning grew by more than 10% y-o-y. Strong growth in the transportation sector
was supported by the end of summer holidays, especially in aviation, while demand
growth for fuel oil and direct crude for burning can be largely attributed to additional
summer power generation requirements, which tend to peak as a result of additional air
conditioning usage. Demand growth for fuel oil increased by 56 tb/d y-o-y, leading to
total consumption for the product of 0.46 mb/d. Additionally, demand growth for direct
crude for burning reached 80 tb/d and total consumption for the product remained at
the same levels as the previous month, around 0.85 mb/d.

Oil demand increased significantly in Iraq for yet another month, marking the third
consecutive month of a healthy rise in oil requirements y-o-y. Total demand rose by
more than 25% or 0.15 mb/d y-o-y in August. Total oil demand, in absolute terms, is
now around 0.75 mb/d after reaching as low as 0.52 mb/d in April this year. Aviation
jet/kerosene was sharply higher in percentage terms, mainly as the result of a low
baseline. Fuel oil for power generation also recorded significant gains of around 42 tb/d
or more than 30% y-o-y.

In 2016, oil demand growth in the Middle East is anticipated to be at the same levels as
highlighted in the previous month’s report, as economic activities are expected to gain
momentum over 2015 levels. Demand is foreseen to be led by Saudi Arabia, with
transportation fuels, petrochemical feedstock and crude oil for direct use projected to
contribute to product growth. However, geopolitical concerns are expected to have a
negative impact on oil consumption in certain countries.

Middle East oil demand for 2015 is expected to grow by 0.19 mb/d, while oil demand
in 2016 is projected to increase by 0.21 mb/d.

China
Chinese oil consumption continued its upward momentum through August, growing
by around 0.49 mb/d y-o-y and led by sizable increases in gasoline and LPG use. Total
consumption stood at 10.72 mb/d during the month. Lower gasoline retail prices,
improvements in year-to-date car sale statistics – especially for sports-utility vehicles
(SUV) models – and the commissioning/ramping up of operations for new propane
dehydrogenation (PDH) plants in the country were major contributors to this growth.

Gasoline demand was higher by around 0.39 mb/d, which equates to around 17%
y-o-y, also stimulated by robust SUV sales, despite a contraction in overall car sales.
SUV sales have been rising on a y-t-d basis, increasing by more than 45% for the first
seven months of the year and giving gasoline consumption a good buffer going
forward. According to statistics and analysis from the Chinese Association of
Automobile Manufacturers (CAAM), year-to-date data sales of passenger cars reached
12.9 million units, up by around 3% y-o-y. SUV models recorded double-digit growth as
did multi-purpose vehicle (MPV) models. MPV sales increased by around 10%
compared with the same period in 2014. Additionally, gasoline retail prices were lower
than the previous August, decreasing to $0.73/l compared with $1.10/l in August of
2014 and from $0.79/l the previous month, as reported by the National Bureau of
Statistics of China.

LPG demand rose by around 0.13 mb/d y-o-y, which equates to more than 13% y-o-y,
supported by the Yantai Wanhua Chemical plant ramping up its new 0.75 million
tonne/year PDH unit since early July. Jet/kerosene demand increased by 37 tb/d or
around 7% y-o-y despite fears of slower economic activity. August diesel demand
remained almost flat, predominantly as a result of limitations in construction activity.
Fuel oil dipped by almost 90 tb/d or around 15% from August’s levels in 2014. This
increase is largely attributed to strict import quotas and maintenance programmes
undertaken by teapot refineries, which are major consumers of fuel oil in China.

The overall 2015 picture slightly improved over the previous month as a healthy
petrochemical segment and robust gasoline consumption provided support to overall
demand. Projections for oil demand development in 2016 remain unchanged from one
month ago. The outlook is assuming transportation and industrial fuels will lead the
product mix in 2016, with GDP growth lower than in 2015, a continuation of fuel quality
programmes targeting lower emissions and continued fuel substitution.

For 2015, Chinese oil demand is anticipated to grow by around 0.37 mb/d, while
expectations for 2016 are in the range of 0.30 mb/d.